Park Aerospace Corp (PKE) 2021 Q2 法說會逐字稿

Good morning. My name is Shannon, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Second Quarter Fiscal Year '21 Earnings Release Conference Call and Investor Presentation. (Operator Instructions) Thank you.

At this time, I'll turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you very much, Shannon. So this is Brian Shore. This is Brian. And I have with me as usual, Matt Farabaugh, our CFO. Welcome to our second quarter investor conference call.

So we filed our earnings release this morning, I think, about 6:30 New York time. It'd be important for you to access that. And also in the earnings release, there are instructions as to how to access the presentation that we'll be going through. And it's really recommended you get the presentation in front of you. It will make this call a lot more meaningful. Also just an FYI, there's supplemental financial information that's attached to the presentation as an Appendix 1, I think it's called.

So just a little bit of an introductory comment. So in Q4, Q1 calls, Q4 of last year, Q1 of this year, I went in into great detail about the impact of the virus and the economic crisis on Park in the aerospace industry. So we'll touch on those things today, but we're not going to go back and rehash everything. It's just too much. What we try to do on these calls is kind of mix it up a little bit. We don't try to cover everything. These presentations take a long time to go through as they -- as it is. So we can't -- we don't really -- I try to cover everything, try to mix it up, like I said. But at the end of the presentation, obviously, we'll take questions. So you feel free to ask any questions you want about any topics you want. So we're going to go ahead and start the presentation. And like I said, after we're done with that, we'll go right into questions. I want to give you a little warning, though. I think it will take at least half an hour to go through the presentation. So buckle up. Why don't we just get right at it then.

We'll go to Slide 2, please. That's our forward-looking disclaimer language. Let us know if you have any questions about that. You can call us afterwards, of course.

Slide 3, get right into it here, the fiscal '21 Q2 results. So it's highlighted, obviously, the right-end column with the yellow highlight. So we're showing the effects of the downturn in the aerospace industry, particularly commercial aircraft. And we could see the top line, $9,250,000. The gross profit is down. Gross profit margin is down below 30%. Not what we would like to see and EBITDA of $1,418,000.

What did we say about our Q2 during our Q1 investor call, what did we say? We said sales estimate, $9 million-ish; EBITDA estimate, $1 million-ish. So we came a little bit better than predicted, but within the range. And that ish is there because as we explained, when we discussed these indications or forecast, a lot of uncertainty. So we put that ish there just because we want to be clear that we're guessing a little bit with these things because there's so much uncertainty in the market and the industry. We just do our best.

So the ish is there, not for humor, but to make a point. Our forecast philosophy, I think we touch on this almost every quarter. We just want to remind you that we give you forecast, we're telling you what we think is going to happen to the best of our ability, assuming we're working hard and doing the things we need to do. They're not easy forecast and that's the point. We don't give a forecast so we can be heroes and beat the forecast and look like we did a great job. We know it's a common practice. But we kind of feel that would be not right for Park because one of our key principles is integrity, and that means we tell the truth.

So we're not going to tell you something other than what we believe. We could be wrong, but when we tell you something, we're going to tell you what we believe. I just want to remind you about that.

Okay. Let's go on to Slide 3. Our top 5 customers in alphabetic order. AAE Aerospace. I think they're in the top 5 quite often. One of the key programs that we worked on through AAE Aerospace is PAC-3 missile and these are rocket nozzles for this missile. There is a picture of the PAC-3 missile system. This is to shoot down incoming enemy missiles and it's used by our country, the U.S., but also our allies in some cases.

GKN is a large contractor. And one of the major programs that we work on through GKN is Sikorsky, that's for aircraft structures. And we see a picture of the Black Hawk bottom right, that's an iconic aircraft. I'm sure most of you have heard of a Black Hawk.

Next one, Kratos Defense & Security systems. They're in the top 5 quite often these days. I think last quarter, we showed you a picture of the Valkyrie, which is a tactical drone. This is a company that makes drones. This is a -- this BQM-167A is a target drone, and we produced -- our materials are used to produce the structures for these drones. I believe, we're the -- well, we've been told by them, we're the main supplier of prepreg materials for all their drone programs.

Meggitt, another large contractor. We worked multiple programs with Meggitt. One of them is the EA-18 Growler, pictured on the bottom left here. It's a derivative of the F/A-18. I'm sure you know the F/A-18. This is an electronic warfare jamming aircraft. And Park supplies exotic radome materials into that program.

Middle River Aerostructure Systems. You know that well, so we won't go into explanation of them right now, though we will discuss them later. And I'll remind you that Middle River used to be a subsidiary of GE Aviation, but now it's a subsidiary of ST Engineering Aerospace, which is a large Singapore aerospace company.

Why don't we go on to Slide 5 here. All right. So we get into these pie charts these days. I kind of like them because I think they tell a story. Top one is just last fiscal year. But the bottom one, I think, is an interesting compare. The bottom -- it's interesting to compare that the top pie chart was last year and the bottom pie chart was the first 6 months of this year. And you can see the obvious, which is that military is much larger, commercial aircraft is smaller and business aircraft is smaller as well.

Now military is larger not only because it is in its own right, but because commercial aircraft is way down. So as a percentage, military went up. Business aircraft. The key program that we're on business aircraft is actually the Global 7500 -- Bombardier Global 7500 through -- that's through both MRAS and GE Aviation. That program has been a little quiet. But we expect that to actually be moving up. So the business aircraft percentage should increase, I'm not saying go back to 18%, but it should increase.

So I think that covers everything on Slide 5 we want to cover. Why don't we keep moving. Slide 6. Okay. Like I said, we're getting into the pie charts, it's going to be pie chart crazy. But again, I think they tell kind of a nice story in an easy format. So this is a new pie chart. We haven't done this before. We're taking military, and this is from the first 6 months, that's the -- go back to Slide 5, the bottom pie chart, military, that's at 51%. Taking that and saying, okay, now let's break down that 51% for the same period, the first 6 months of the current fiscal year.

This is interesting because military is a focus for us. Let's talk about some of these things. Special mission. Those are often modified aircraft for special military missions. Rocket nozzles. Those are ablatives through -- the way they're designed to withstand very high temperatures, of course. When these rockets are fired, very high temperatures have to be withstood. Drones. I think you know what drones are. And then the aircraft structures, that's all over the lot. Radomes are specialty encasings for radar antennas. And it's very important that the casing is very transparent, doesn't dissipate the signal. It doesn't distort the signal. When it come -- we make radome materials for commercial aircraft as well. But when it comes to military, much more exotic, the materials are much more exotic.

So let's look at some of the pictures for the fun of it. Park loves niche military programs, absolutely we do. And most of the programs, we focus on our niche. Again, if you look back to the pie chart, these are niche categories, except aircraft structures, which could be more volume-oriented, except even in aircraft structures, we focus on what would be more in niche. We're not going after, like, the F-35 structures, for instance. So V-22 Osprey, that's -- our material is used in some of the structures in the aircraft.

The Doomsday aircraft. We spoke about this before. It's actually -- we're making some very strange parts for this aircraft, which we're not really in a position to talk about. This is a modification of the 747, as probably most of you can tell. I believe there are maybe 4 of them. So this is interesting. We're told that if the -- and this is an example of a special mission, sorry, because the 747 is modified for special mission purposes. We're told that if the commander-in-chief ever gets on one of these airplanes, that's probably not a good day because the -- one of the purposes of these airplanes is to control and direct military operations in a nuclear war. So you could put this in a category of big deterrent for something really -- again, something really bad happening.

The Global Hawk. That's a drone, obviously. You can see that. And you might remember this because this -- one of these was shot down by the Iranians not too long ago. So -- and that's, I guess, good for Park. That means that has to be replaced with more Park materials. And our materials are used for the structure on the Global Hawk aircraft.

Okay. Why don't we go on to Slide 7. So let's talk about our 3 market segments and some little more detail. But before we go into that, there's a nice picture on the left-hand side here. And it was provided to us courtesy of David Clark Company. So David Clark, most pilots know David Clark as a manufacturer of headsets. I bought my first David Clark headset in 1986 when I first became a pilot. But obviously, they also produced these suits for aircrews for NASA and the Air Force.

So this is a really innovative, wonderful company. So for -- these suits might be for -- not might be, I think, for the Orion space program, but also for the U-2. I don't know if you know that U-2 is currently flying. If you might look up Gary Powers for reference to the U-2. When the SR-71 Blackbird was flying, used for the SR-71, WB-57, that's Canberra, a very old airplane that's used for very high-altitude operations.

So the key thing here is that the common theme, very high altitude suits, and we supply the materials used to produce the helmets. We also do what's called kitting for this company. They asked us if we could help out with kitting, we said, "Sure." So this is a really great example of a niche program, a niche customer, a niche military application for us. Not a lot of volume, but we love working with people like this.

So let's talk about military aerospace. We're continuing to focus on these niche programs and opportunities. It's an enhanced focus area for Park partly resulting from significant downturn in commercial aircraft industry. What is -- what does it mean? What's going on here?

You probably got tired of hearing it, but pre-COVID, we would talk on these calls about how stressed we were keeping up with the programs as they're ramping steeply. We didn't have our expansion online yet. We still don't and we're really pushing, pushing, pushing. We never got behind, we never hung up a customer, especially MRAS, but it was lots of brute force, lots of effort just to keep up during that time. I think there were months where we were just flat out at our full capacity where we had no extra room at all to move up. So it took a lot of work and it was very demanding. But as a result, we just didn't have the bandwidth to focus on other things like military, which you really want to focus on. But we just weren't able to do that.

Now with the downturn in commercial, it's opened up for us the opportunity to focus more on military, which is really a good market for Park because it's kind of a -- it gives us more niche opportunities than large commercial structures do. And as a company, we like to focus on niche programs and opportunities when available.

So also, just one thing I want you to understand. Military for us being niche is different rhythm than commercial. When we run a commercial program like the A320, we just run it, just run it every week, every month. You keep running, running, running. Military stuff is not that way. Some quarters it will be active than other quarter, maybe active for 1 quarter, may be dormant for a couple of quarters. That doesn't mean that there's anything wrong. That's just the pace and more -- and the rhythm of military programs.

So with military for us, our quarter-to-quarter, it could jump up and down, which is not the case with commercial. Normally, commercial would be fairly predictable with -- we could have a strong quarter with the military, next quarter, it could be down. Next quarter, that could be up. But that's because of the rhythm and how these programs work. Like I said, some quarter, it could be active. The same program could be dormant for 2 quarters, then active again.

Let's go on Slide 8. Continuing with our end market focus, business aircraft. So our plan is to continue to support the GE Passport 20 engine program for the Bombardier Global 7500 and other business aircraft programs who are currently qualified, and also to continue to focus on developing new niche business aircraft opportunities. So this segment should grow. With the Global 7500, it's quiet. That program is more quiet in Q1 and Q2. But we've been told that it's being pushed up at this point. Also, interestingly, the business aircraft industry, not so bad. The business aircraft sales are actually holding up pretty well. We talked about this in prior quarters. I won't go into details about the dynamics of the business aircraft industry as compared to commercial, but just wanted to flag that for you.

Commercial aircraft, that's kind of the big one for Park. So let's talk about that. Almost everything you read is negative. News is all seemingly all bad. You can't find too many good articles about commercial aircraft industry or commercial aviation or commercial airlines, but is it all bad for Park? That's a key question for us anyway. Are all commercial aircraft programs created equal? Maybe not. So GE Aviation commercial aircraft jet engine programs represent approximately 70% of Park's commercial aircraft revenues in the current fiscal year-to-date, fiscal '21 and Q2 year-to-date.

We're talking about the GE Aviation commercial aircraft portion because for GE Aviation, remember, we also supply into that Global 7500 program, which is based on this aircraft, not -- we don't consider that in our commercial aircraft segment. I think last year, that 70% would be higher. So point is a big portion of commercial aircraft for us ties into GE Aviation programs. So with that in mind, let's take a look at GE Aviation jet engine programs, which Park supports for perspective on Park's positioning in that commercial aircraft industry.

Let's go on to Slide 9. This slide you've seen before. So it's just kind of a reminder because we're going to talk again about GE Aviation. So remember, we have a firm pricing LTA with MRAS through 2029. MRAS, as you know, is a sub of ST Engineering. We're building a redundant factory to support that program. And we'll get a -- we'll update you on the redundant factory a little later on. And as you know, this is all things we've talked about before. Through these GE Aviation programs, were sole source on the first 4 items are, let's call that, the A320neo family, all with a LEAP-1A engine. Next one is 747. After that, we have the COMAC919 and ARJ-21. ARJ-21 is a regional jet. 919 is still being developed. And of course, there's the Global 7500 which we discussed a couple of times already. Top right on Slide 9. We also want to remind you that we produced a primary structure for the Passport 20 for the Global 7500, which is not part of the MRAS LTA. That's actually for GE Aviation.

So why don't we go on to Slide 10, sorry, Slide 10. Let's do an update on these individual programs to put them into perspective. This is pretty important. So the first item, we talked about that A320neo family of aircraft with the LEAP-1A engines. What has Airbus said? So what they said, to my knowledge, is reducing A320 production from 60 per month pre-COVID to 40 per month, producing by 1/3. Will Airbus drop another shoe? A lot of speculation around about what Airbus might do or might not do. But we don't know. What we know is what they said so far. And I want to remind you, Airbus is not Boeing. And Boeing has come out with news recently that we're bringing their numbers down further. But Boeing and Airbus are competitors, but my opinion is they're -- our opinion is they're positioned very differently in the commercial aircraft industry. So for what we know, what we've been told, the A320 program is being reduced by 1/3.

The Global 7500, okay, we keep going back to this. News is actually relatively positive. Last quarter, I said this is the biggest question mark in terms of the GE Aviation programs. But the news is positive. We understand Bombardier is trying to push this program up, up to levels which are higher than pre-COVID levels because they're getting this -- I don't know, I'll speculate. They're getting this aircraft in the market. It's been certified and they want to get going. So that's my opinion anyway as to why. But they're definitely trying to push it up from what we're told.

747-8. So very sadly, Boeing announced that they're going to terminate production of the Queen of the Skies in 2 years in 2022. But the key thing for us is there are no change to production rates expected until then. They're not going to taper down. They're going to -- their production rate is 6 per year, 24 engines per year. We hope some will come in and decide to buy more of these airplanes. But at this point, the 747 is level for us as compared to pre-COVID.

COMAC919. That's the single aisle competitor to the A320 and 737. That's still in development. You might want to look up in the COMAC website when they expect that airplane to be certified into production. So -- but it's a very important, potentially a very important program for Park, but probably not going to affect well. Let me say, it's not going to affect this year except for some small quantities to do some development work. The next year, I don't know, we'll have to see about that. Next fiscal year, I'm talking about.

So then there's COMAC ARJ21. This is an aircraft in production and it's a regional jet. And that program is strong and proceeding well. And I just want to remind you, COMAC is different. They're not like the Western aircraft manufacturers. They're not reducing production at all, as far as I understand. I think they're trying to push it up. Chinese commercial aviation, I think, is pretty much recovered.

So what does this all mean? In terms of the Global 7500 and ARJ, they have to be able to work out deals with GE Aviation in order to push these programs up because GE Aviation will have to produce the engines, but that's the impetus for those 2 programs. So look at the whole thing. We have -- let's get to the A320 in a second, but the Global 7500, this is compared to pre-COVID, trying to push up. 747 flat as compared to pre-COVID. COMAC919, trying to push up, although probably not a factor this fiscal year or maybe next fiscal year. COMAC ARJ21, trying to push up as care period -- pre-COVID levels. And the A320, down by 1/3. So you'd say, okay, average all those things. The A320 is going to be the biggest portion. So that will have more of the weighted average. Well, what's the average? What's the average reduction? It's not going to be 1/3 because you have 1/3 reduction for the A320. Everything else is being pushed up or flat. So I don't know. Want to be conservative? Let's say, it's a 30% reduction, maybe a 25% reduction, all right? These are just the facts that we know. And it's important that when we talk about commercial, we're talking about Park commercial, not just commercial generally.

So let's keep going because we're on a theme here, Slide 11. So we're continuing the update. So we have an arrangement, we touched on this last time with MRAS to maintain monthly minimum baseline production levels to preserve Park's ability to ramp up production when needed. This is important for Park and MRAS. And just FYI, MRAS and Park agreed to defer December's production to allow Park to perform major maintenance on key manufacturing line necessarily to support the program. That's our hot melt tape line that had a -- required major maintenance.

That actually was being deferred a little bit, probably a little bit too long. So what's interesting though is that this minimal baseline level is approximately 1/3 of pre-COVID levels, 1/3, okay? It's important that you keep that number in mind, 1/3, because we're going to try to pull this all together in a second. Next item. Key aviation program revenues were about $29 million or an average of approximately $7 million per quarter last year. Pre-COVID level, $7 million per quarter. So we're comparing that to -- so 1/3 of that, 1/3 of that, sorry. Remember, our arrangement with MRAS is to go to 1/3 pre-COVID levels. That would be what? Do the math, like $2.3 million. Just divide $7 million by 3 so it's about 1/3, about $2.3 million, okay? That number, keep that in your head -- in your mind.

Now key question. Based on analysis, the specific GE Aviation programs that Park supplies into, what should Park's revenue expectation be to support those programs? Well, just on the prior page, included that maybe for us, our average GE Aviation program end market is down by 25%, maybe 30%. So if we take $7 million, and we reduce it maybe by 25%, 30%, let's round the number, maybe we should be looking at $5 million per quarter. $5 million per quarter. But we had this number of $2.3 million based upon the minimum we've agreed to with MRAS. That's half that number, isn't it? Less than half.

So what's going on here? Something doesn't match. Let's keep going. Slide 12, to try to bring this all into focus. So let's look at the quarters. Q1 was $4.1 million. That's under that $5 million number. But Q1 was a transition quarter, where things started out pretty strong and deteriorated during the quarter. These are fiscal quarters. Q2, $2.9 million. Why is it above the $2.3 million? Because we didn't make our deal with MRAS until the end of June. So the end -- in June, we actually shipped more than that average. If you say $2.4 million per quarter, that would be 800 -- approximately $800,000 per month, right, if you follow the math here. So that's the reason why Q2 is a little higher.

Now Q3, remember, we didn't produce 1 of the 3 months. So if we say normally, it would be about $2.3 million, $2.4 million based upon -- per quarter based upon the arrangement we have with MRAS, well, it's only going to be 2/3 of that because we didn't produce in September, we're only producing October, November. So Q3 we're talking about only $1.5 million, only 2 months' worth of the quarter, $1.5 million approximately. These are approximations. These are ish kind of numbers. Actually the question mark there because there's a lot of uncertainty with some of these forecasts.

Q4, I would say, well, 3 months, we should be at maybe $2.3 million, $2.4 million based upon the minimum arrangement we have -- minimum production arrangement we have with MRAS, okay? So what's not making sense here? $2.4 million? Didn't we just say $5 million? What's not making sense? Let's keep going. Reflections on GE Aviation program forecast for Q3 and Q4 and beyond, what's going on? Significant diversions from and mismatch between our agreed to minimum monthly baseline production amounts and current end market requirements for GE Programs with Park is on. That's that kind of rough number, guesstimate, $5 million estimate compared to $2.3 million, $2.4 million. Very big divergence. So something has to give.

And what we have here is inventory destocking. And you probably read a lot about this in aerospace. It's pretty significant. It's pretty massive. Our opinion is many companies in aerospace supply chain are demoralized. They're trying to just go through the week. They're not thinking ahead. They're in a survival mode, not paying proper attention to the need to ramp up when inventory destocking ends. I mean, look, if they're trying to get through the next week or 2 they're not really going to be thinking about 3 to 4 months from now because their answer is going to be, why should I bother with that? If I don't get to the next 2 weeks, maybe 3 months from now is irrelevant. It's a tough position a lot of companies in the aerospace supply chain are in.

Fortunately, Park is not in that position. We discussed that last quarter. I think we asked the question as to whether it was just luck. And I think we gave you some thoughts about whether it's luck or not. But here's the thing, this can't last forever. Inventory can't go below 0. That's not mathematically possible. It's just simple math and maybe it's a ticking time bomb. At some point, the destocking has to end.

So let's go to Slide 13. Abrupt and steep ramp-up by supply chain could be required when inventory destocking ends. It's important to understand that this ramp-up would be a function of the end of inventory stocking that is not dependent on or a function of recovery of the commercial aircraft industry. We're saying based upon the program analysis we went through a couple of pages ago, this is the reality. We're not saying we're waiting for -- this is reality based upon any recovery in the commercial aircraft industry. That's a different matter.

Now if the Airbus drops another shoe, they reduce their forecast further, they would have to go back and do the math again. We're talking about what we know now, the reality of what we know now. More immediate question for Park is not when the commercial aircraft industry recovery will happen, but when industry supply chain inventory will be normalized and when inventory destocking will end. When will it happen? That's the really good question. And we don't know the answer to that. But my opinion, and it's just partly an opinion. I don't have enough facts, we don't have enough facts to give an answer with certainty, is that it can't really go past the end of our fourth quarter. It just doesn't seem like that's possible from the information we do have. We have a lot of information. We just don't have all the information.

So based upon the significant information we have, I'm not talking about the supply chain generally for aerospace. I'm talking about the supply chain that we're a part of supplying these programs. There is a possibility that this destocking could end at the end of calendar year, but I can't see how it can go past the end of the fiscal year. So we don't know. And obviously, that's going to affect our quarterly forecast, which we'll get into in a second.

Our opinion, supply chain may be taking inventory down to dangerously low levels. Watch out because that means there'll be no cushion when there's this day of reckoning. Wait a minute, our inventory is down to very low levels and now we have to start supporting the end market at the end market requirement levels, what are we going to do? It could be a little bit of a panic.

And the other problem that you have to consider is that some members of the supply chain may not be able to respond, may not be ready because they're in that kind of demoralized malaise kind of mindset. But not Park, Park is working hard to be ready. But it could be very interesting. And it could be dramatic, it could be abrupt. We don't know. We use the word could because we're not sure.

GE Programs, just want to go back operating at less than half of what is required to support the end market programs. That's a big deal. And the math just says that can't last forever. It has to stop at some point. And when it stops, what's going to happen? Is it going to be pretty abrupt? Is it going to be pretty steep? Will the supply chain be ready? We don't know, but we'll be ready. At least that's what we're working very hard to be ready. And also work with our suppliers as well to make sure we're not caught short.

Why don't we keep going. I think we kind of went through that analysis, and I'm sorry it took several pages to kind of pull together. Slide 14, just a little bit of a refresher slide, single-aisle versus wide-body. Trend is already in place favoring single-aisle. That was even before COVID. Industry experts and analysts, for whatever they're worth, sorry for the sarcasm, believed market for single-aisle aircraft will recover before the wide-body aircraft market. This -- look, I know these people, they get paid a lot of money to be analysts. It's not rocket science. Because if you look at commercial aviation and actually doing somewhat better when you talk about domestic travel inside the U.S., maybe inside Europe, short distances in Asia.

What's suffering badly is international travel. Domestic travel has still not recovered completely, but it's a lot better. If you talk to people who fly domestic, they will say, "Hey, those airplanes are pretty crowded." The airports are pretty crowded, maybe not pre-COVID crowded, but crowded. But international flights, almost nonexistent. What's the point here? Those domestic flights are single-aisle, those international flights are wide-body. So there's really very little requirement for wide-body airplanes at this point. And that's why -- you can pay you an analyst for an opinion, but that's why it's pretty obvious that single-aisle is recovering more quickly than widebody.

Major single-aisle programs. There's 3 big ones: the A320, 737 MAX, the 919. We're in 2 of the 3. Those are the 2 of the 3 that we think we want to be on. The A320, great program, fantastic program. 919, pay attention to that one because they're playing catch-up, the Chinese, but there's a lot of prestige involved in this airplane. It means a lot to them to get the airplane in the market and be successful. The MAX, hopefully, they'll -- Boeing will find a way to get things back in line and recover. But I guess even there -- Boeing is indicating that things are going to be pretty rough for them for a long time.

So we parked -- sorry, yes, Park. We Park -- we checked -- Park checks 2 of the 3 single-aisle boxes. And our opinion is if you'd want to be in single-aisle aircraft, those are the 2 boxes you want to check. We believe single-aisle is the place to be in commercial aircraft industry. And we believe we're ideally positioned on those 2 most attractive single-aisle programs.

Let's go to Slide 16. A little update on Park here, how we're doing. But first, let's talk about the expansion. The total budget, approximately $18 million. Spending to date of about $11.25 million. Spending to go with that, if you do math, about $6.75 million, $6.75 million. Completion expected first half of calendar year 2021, maybe around March. This has pushed back a little bit, a little bit of delay, partly weather, a lot of wind, which you'd say, "Boy, what's the matter with you? How could you -- that's a news flash? There's a lot of wind in Kansas." I agree.

And also -- but here's another thing, COVID crowd restrictions. That's actually a problem for us because a lot of the equipment is very sophisticated elegant equipment that we're having installed. It's not order it off the shelf. It's all specially designed for Park. So it's really important that the manufacturer come in when the equipment is being installed and we're bringing it up and bringing it online. And some of these manufacturers are not from the U.S., they're overseas, Europe. And it's very difficult to get these guys to be able to travel to the U.S. So we're having a little trouble with that. We're trying to work through it. But that's why we think there could be some delays in finishing.

When will the plant be qualified and actually in production for MRAS? Remember, this is a redundant plan for MRAS. It will be used for other things, but the purpose is redundancy for MRAS, the MRAS programs and GE, too, I guess. Well, it really depends on MRAS and how quickly they want to move with a qualification, how much attention and how much resource they put into it because we both have to work on the qualification. It's kind of a team effort between MRAS and Park. My guess is maybe they're a little distracted right now. So they may not make this the highest priority. Obviously, they don't need it for capacity at this point. So we're not sure. Obviously, we'll push them. We'd like to get qualified by the end of the year, but maybe a more realistic scenario is the beginning of calendar year '22.

Okay. So let's go on to Slide 17. Park continues to be fully operational throughout the pandemic. Our New York office is open. Our Kansas manufacturing facility continues to be operational. It's been operational from day 1. Remember when we told you we got those 25 letters from military contractors saying, we're expected to stay open. Not that we're essential, I know we can stay open, we are expected to stay open. If you think about some of the programs we talked about earlier in the presentation, maybe you can understand why that is.

Customer flexibility program has been instrumental in helping Park effectively and quickly adjust to changing and unpredictable business environment, currently 81% participation. This is like a cross-training program and a large portion of our people are participating in that program. Park's special people continue to do very well under difficult circumstances.

To the right here, we have a treater crew. This is our first -- one of our first shift solution treater crews. And actually interesting because one of these guys is not normally on that crew. One of these guys is -- his normal job is hot melt, hot melt film, I believe. But through the customer flexibility program, he moved over to this solution crew. So I just want to let you know, we have 111 people at this point. So these are 4 out of 111. They're my heroes. These are unsung heroes. They come in to work every day and do their jobs. They're not fooling around, no whining, no complaining. And you remember, we're working, especially on solution on these military programs, some of which we discussed at the beginning of the presentation and some we cannot discuss, these programs protect us and our allies. These are very important programs. These guys are there every day, day in and day out, no whining, no complaining. And that's the whole group, 111 of us right now.

So I just want you to know that we paid out all 111 of our folks, including Matt and me $125 bonus for Q2. It wasn't a great quarter, but we met our objectives and the bonus was paid to these 4 guys as well as everybody else.

Let's go on to our last slide, 18. So our summary slide. The world has been badly damaged and is a very troubled place at this time. I'm not going to go into what that means because I think we all know what it means. But at Park, we continue to go forward, not feeling sorry for ourselves. We're not hiding away and waiting for the world to get better. We're not letting up. Others may falter, but we are not going anywhere. Park is a strange and unusual company. We are not like others. We play for keeps. We don't give up. We don't quit. We're here to fulfill our destiny.

Last item of interest is that Park went public on November 17, 1960. So this November 17, we will have been public for 60 years. Interesting little footnote is that -- sorry, November 17 is my birthday. I didn't know that Park went public on my birthday. I was born before that, '51, but November 17 is my birthday. When I came to work at Park in 1988, I was going through some old files and I found a -- in this file, which was kind of this tombstone ad with the edges of it not even cut properly, rag -- jagged edges. We put it in a hermitically sealed, I don't know, case so it would not decay further or further discolor. I looked at this and I said November 17, nobody ever told me that the company went public on my birthday. So that's how I found out about it. I found out about it not in 1960, but in 1988.

So that's the end of our presentation, and thank you very much for listening, hanging in there. I know these get very long. But operator, we're now ready for questions.

(Operator Instructions)

We have a question from Brad Hathaway with Far View.

One quick just clarification. I may have missed it, but on Slide 15, did you talk a bit about the Q3 and Q4 expectations?

You know something, I did miss that. I apologize, I went right over that. So why don't we go -- go back to Slide 15. I just must have skipped over that slide. I have a print out in front of me, and I must just missed that slide. I apologize. So thank you very much for bringing that to our attention.

Yes. So what we're talking about for Q3 is $10 million-ish. And again, we use that ish because there's a lot of uncertainty based upon the things we've been discussing, particularly the destocking and when the destocking will end.

And for the EBITDA, we're talking $1 million-ish, which was our forecast for Q2. Our Q2 forecast was $9 million and $1 million. So you're going to ask the obvious question, at least I would, well, why is the number -- the EBITDA number a little bit down in Q3 considering the revenue number is a little bit up? And that's because the product mix is a little less favorable in Q3 as compared to Q2. That's not a trend. The product mix goes up and down quarter-to-quarter based upon what programs are active at this point. Maybe a little higher than $1 million-ish, but that's what we're thinking about.

For Q4, we have our internal numbers, but we're not going to provide them at this point because we'd really be just guessing. There's too much uncertainty. Again, the key uncertainty, well, it's 2 things. One is how does the market do generally, but this is the key thing. The very big driver is that destocking when it ends, that could have a dramatic impact on the top line and also the bottom line as well.

And again, thank you very much for bringing this to our attention. I'm sorry I missed this, but let me talk about our long-term forecast for a minute as well. So we -- back on Slide 15, we drew our long-term forecast on -- during our Q4 May 14, 2020, investor call. And the reason was that we just felt there was too much uncertainty, and we'd just be guessing and we didn't think we're doing anybody any favors by just coming up with a guess. It just doesn't help anybody to do that. And we're still not ready to reissue our long-term forecast. We believe the fundamentals that were in place with the prior long-term forecasts are generally still in place. The question is how much to the right do things move.

And that doesn't imply we're waiting. We're waiting around for things to get better. That's not it at all. We're working hard on everything that we can control, which is a lot. But we're still not in a position. We don't feel to give you an update on long-term forecast that would be meaningful. And we don't want to just guess at it.

And down the bottom of Slide 15. So our current thoughts about our long-term forecast. More generally, we pull out our pie charts again to kind of give you some perspective. And I guess the point of this is that commercial aircraft will be driven to some extent by that destocking factor. And we continue to go after commercial aircraft programs, more niche. A business aircraft, same thing. But military, we feel, is our big opportunity right now. And that's where we're focusing a lot of our attention. So that doesn't quantify the long-term forecast. But as I mentioned in our prior slide, it actually is a good thing in the sense that the commercial aircraft industry is down because it gives us the opportunity to focus on things that we'd like to focus on that are strategic for Park long term.

And again, I really apologize, Brad, for missing that. I don't know what happened. But I think what happened is I had 2 pages stuck together, and I just flipped over. So I'm so glad that you asked me that. These would have been horrible if I missed covering this slide, a pretty important slide.

Not a problem. I was slightly panicked that I had spaced out for a minute. So glad to hear it wasn't just me. So one other question for you. With regards to M&A, I think the last time we spoke -- or last time you spoke in the last quarter call, you talked about having a little more visibility on what the M&A landscape might look like in September and October. So I'm curious if you have any update there and kind of how you're seeing the opportunity set out there for kind of using some of your capital.

Very interesting question. So we have been active. We've been looking and a little interesting anecdote here. About a year ago or, let's say, last fiscal year, I think it was sometime last calendar year. We looked at a couple of companies that were being auctioned by bankers. And we did bid on them. And we bid probably like half what they were sold for. And we -- I learned that they're sold for because they're bought by public companies, the price was disclosed. And we're just stunned by that. We actually stretched to get to our number. With a bit of a hindsight, maybe our number is too high.

So we were told by the bankers that, you're not going to make it in this auction. We say, okay, fine and moving on. But we were stunned to hear that they actually sold the business for the numbers that bankers could have indicated to us. They said, "You have to get to this number, more or less." You know how they do it. And well, we're not going to do that. And then the business were actually sold for approximately those numbers or that range.

Now fast forward. We looked at another business, let's say, a couple of months ago or so, maybe this summer, which is also being sold by a banker. It was a smaller business. And we did provide a number. We did provide a preliminary bid, as they call it, a nonbinding bid. And the banker said, "Well, your number is too low." And we said, all right, well -- and he gave us a number we needed to get to, you know how they do this kind of stuff. And we say, "Well, we don't -- we're not moving our number up. This is a number we feel is a proper number." The big difference is that business was not sold. Not only was it not sold for a higher number, it was not sold at all.

So I think the business was removed from the market. And I thought that's very interesting because last year, everybody, anybody is bidding for these businesses. This year, maybe not, or at least this time frame, maybe not. Maybe -- but we don't have so much competition. At the end of the day, we feel happy with the bid that we provided, which is a preliminary nonbinding bid. We felt it was a proper valuation, but it was interesting that it wasn't bought by somebody else at twice our number. It was bought by nobody.

We also are looking at another business now that was actually -- it's not an auction. One of our large customers put us on to it. They let us know that there is a company that they're aware of that might be for sale. So we contact the ownership directly and we're talking to them. That may or may not happen. We'll see. But we have been active, but we're also being disciplined. We're not just going to throw money at something. And it seems like right now, as compared to last year, we're in a much better position to get a proper value for our business and an acquisition. Well, what we consider to be a proper value as compared to, like I said, last year.

So I'm glad you asked that question. There is -- from at least our limited perspective, seems to be an interesting difference in the M&A world.

Got it. Great. Do you mind if I ask one more question?

No. As many as you want.

Great. So I guess the question is kind of the possibility for the company to gain market share over the midterm because of the demoralization of, I guess, the rest of the supply base and maybe some of your competitors. I mean do you see that as -- given your kind of relative strength, do you see the chance to be kind of to find more niche programs that might fit for Park during that period? Is that something you're kind of excited about?

Absolutely. That's our objective. Like I said, we're not going to sleep. We're not feeling sorry for ourself. We're going forward out there. When they say, take an engine kick and you know what, we're looking for business. Unfortunately, right now, we can't call physically on most customers. They just don't want us there. And you know how that -- with COVID, of course. So a lot of it is phone work, and we make ourselves nuisances. But we're not going away and we keep looking for new opportunities, new opportunities, new opportunities.

Yes, our sales folks need to be energized because that's what it's about. And we do want to take advantage of this opportunity where maybe others aren't paying attention or maybe demoralized and we're not. So absolutely, absolutely.

Just one of the things that you mentioned, new programs that I should mention is that when we talk about military, which we've spoken about the military quite a bit. Interesting development is that there's only 2 domestic suppliers of composite prepreg materials in the U.S. So Park is one of them. There's another larger competitor. All the other competitors are foreign-owned, owned by foreign companies. And we're wondering and hoping actually that, that could work to our advantage. We think it should. But obviously, we'll take advantage of anything that is made available to us. So I just thought I should add to that.

And I'm currently showing no further questions. I'd like to turn the call back over to Brian Shore for any closing remarks.

Thank you, operator, and thank you, everybody, for listening in. I appreciate being able to go through a quarter, every quarter with you. And any comments you have at our presentation, let us know. I mean, like I said, we're not -- we don't try to cover everything. We try to cover what we think might be of interest each quarter and it's going to be different each quarter as well. And of course, any questions, give us a call. You can reach Matt and I today, we'll be around and available. So thanks again. Have a great day. And we'll hope to talk to you in the near future. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.